Cigna agrees to buy Express Scripts as health shakeout speeds up

(Bloomberg) -- Cigna Corp. agreed to buy Express Scripts Holding Co. in a roughly $67 billion deal that continues the rapid transformation of the health-care business as companies and consumers chafe at rising costs.

The price includes $48.75 in cash and 0.2434 shares of stock of the combined company per Express Scripts share, the companies said in a statement Thursday. The terms represent a roughly 31 percent premium to Express Scripts’ closing price on Wednesday, according to the statement. Cigna will assume approximately $15 billion in Express Scripts debt.

Express Scripts is the largest remaining independent drug middleman. Its biggest competitors are the pharmacy-benefits management companies run by CVS Health Corp. and UnitedHealth Group Inc.

[Image credit: Bloomberg]

Pharmacy-benefits managers have come under increasing political pressure in recent weeks as the Trump administration looks for ways to lower medical costs. The president’s Council of Economic Advisers, in a recent report, criticized the companies’ market power and the opacity of their drug-price contracts. And on Wednesday, Food and Drug Administration Commissioner Scott Gottlieb took aim at what he called drug plans’ “rigged payment scheme.”

Companies are also increasingly restless over their high health-care bills. Amazon.com Inc. said earlier this year it would team with Berkshire Hathaway Inc. and JPMorgan Chase & Co. on a new venture aimed at lowering employee health costs. And large employers from Walmart Inc. to Blackstone Group LP are experimenting with ways to reduce their outlays on employee health care.

As the outcry over high drug prices has intensified in recent years in the U.S., the pharmaceutical industry has also blamed the pharmacy-benefits managers for not always passing on to patients the rebates they negotiate.

Express Scripts and its rivals are becoming more aggressive with tactics to control costs, increasingly denying coverage of some drugs. In addition, many health plans now subject patients to high-deductibles they must meet before their drugs are covered.

Shares of Express Scripts jumped 20 percent to $88.44 at 7:07 a.m. in premarket trading in New York, while shares of Cigna declined 4.8 percent to $185.

Losing Anthem The agreement comes as Express Scripts is set to lose its biggest client. Last year, health insurer Anthem Inc. said it would set up its own pharmacy-benefits management unit, after earlier accusing Express Scripts of overcharging by billions of dollars.

The loss of Anthem after 2019 has put pressure on Express Scripts amid consolidation in the health industry. In December, CVS Health agreed to combine with Aetna Inc. in a $67.5 billion deal bringing together one of the largest U.S. drugstore chains and the third-biggest health insurer.

Last year, Anthem’s planned takeover of Cigna was blocked on concerns it would undermine competition, ending an almost two-year battle to combine two of the biggest health insurers in the U.S.

In November, Express Scripts’ top executive said the company would be open to a deal at the right price, though it wasn’t actively looking for one.

“We don’t need to sell to be very successful in the future, but we are always open to others who may all of sudden conclude they want what we have,” Express Scripts Chief Executive Officer Tim Wentworth said.

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